Internal Revenue Service

Two weeks ago, Senate Democrats filed cloture on the Republican-led filibuster of the DISCLOSE Act, and failed to achieve the necessary 60 votes to bring the bill to the floor. Thus the DISCLOSE Act died once again, as it did in 2010, at the hands of Republican Senators who prefer obstruction and dark money over functionality and transparency. And unless there is an abrupt, unexpected reversal of the tide in the Senate, those who wish to bring a higher level of accountability to our democracy will, in the short term, have to explore alternative routes to bring about such reforms.

Those alternative routes exist in the federal agencies that interpret laws passed by Congress, but that so far have done a poor job in doing so correctly.

For confirmation of this, one need only look at the significant dilution of the McCain-Feingold Act of 2002, which had strict provisions requiring outside groups – including 501(c)(6)’s & 501(c)(4)’s – who participate in electioneering communications (any communication about a clearly identified candidate on satellite, T.V., or radio within 30 days of a primary or 60 days of a general election to a relevant targeted audience) to disclose their donors. The Supreme Court’s Citizens United ruling upheld this part of the law, with eight of the nine justices in agreement.

However, transparency would take a back seat with the Federal Elections Commission’s interpretation of the law, in which a loophole to disclosure was written into their regulations. That FEC regulation only requires disclosure of donors for 501(c)(4)’s and 501(c)(6)’s if those donors specifically earmark their donations for the purpose of electioneering communications. Thus as long as a donor does not require specifics for an organization on how to use their donation, disclosure of the donor’s identity is not legally required. Yet the disclosure provisions of McCain Feingold were not written – and were never meant to be interpreted – this way.

On April 2, 2012 Congressman Chris Van Hollen of Maryland’s 8th District won a lawsuit he filed against the FEC challenging the agency’s interpretation of the law. D.C. District Court Judge Amy Jackson found that the FEC had severely watered down existing legal requirements to disclose donors in campaign-related ads, stating “…Congress did not delegate authority to the FEC to narrow the disclosure requirement through agency rulemaking.” While Judge Jackson’s ruling is supposed to restore the statutory requirement that requires greater disclosure of the donors who provide funding for electioneering communications, it remains unclear that it will be implemented. Paul Ryan, FEC program director and associate legal counsel at the nonpartisan Campaign Legal Center has assessed, “Unfortunately, it’s highly unlikely that this dysfunctional commission will heed the court’s order anytime soon.” Implementation will also be delayed further due to appeals from conservative groups.

Had Congress’ law had been implemented accurately, full disclosure would have been the reality of the 2010 congressional races, which instead were marred by over $135 million in undisclosed spending; and which continues to mar the current election cycle.

Another party at fault is the IRS, which has sat idly by as a number of overtly politically-based 501(c)(4)’s have engaged in an overabundance of election activity when they are supposed to be first and foremost social welfare organizations. It seems obvious to all that the primary activity of organizations like Crossroads GPS and American Action Network is to engage in political advocacy and spend hundreds of millions of dollars influencing elections. Due to IRS inaction on the issue, the donors of these organizations need not be publicly disclosed.

In June the IRS finally initiated steps to to investigate some of these organizations taking advantage of tax exempt status while at the same time being overly engaged in election processes, in particular Crossroads GPS. However it is unlikely that any actions or penalties will be taken or applied in the near future leaving these huge, undisclosed, tax-exempt pools of money to flood our electoral process for the foreseeable future.

Moreover, and perhaps more importantly, IRS regulations that implement Internal Revenue Code distort the intent of the law. As noted by Democracy 21 and the Campaign Legal Center in a letter to IRS commissioners:

The Internal Revenue Code provides that section 501(c)(4) groups must engage "exclusively" in social welfare activities. … The regulations implementing this provision state, however, that "social welfare" organizations must be "primarily engaged" in social welfare activities.

If, as Congress intended, 501(c)(4) groups could achieve their tax-exempt status only by “exclusively” engaging in social welfare activities, the Crossroad GPS’s of the world would instantly have their (c)(4) statuses revoked. Instead, as we’ve witnessed with the tax-exempt status of the American Legislative Exchange Council, the big money players are able to indirectly charge the American taxpayer for their lobbying and political activity by not paying their fair share, benefitting their entrenched interests and not the country as a whole.

We must not give up on transparency in our democracy, especially if our electoral process is to remain awash in unlimited spending under the Citizens United ruling. In the not so distant past this was the dream of Republicans and Democrats alike. In his 2002 memoir “Worth Fighting For,” John McCain, a former champion of transparency, wrote “By the time I became a leading advocate of campaign finance reform, I had come to appreciate that the public's suspicions were not always mistaken. Money does buy access in Washington, and access increases influence that often results in benefiting the few at the expense of the many.” We await a return to this sober analysis by the GOP, and by the agencies who implement the laws Congress passes; the foundations of our republic are dependent on it.